Sanctions for the non-registration of beneficial owners in the Czech Republic, Germany and Austria
Legislation on penalties for failure to register beneficial owners in the Czech Republic, Germany and Austria
The requirements of the 5th Money Laundering Directive of the European Parliament and the European Council have been implemented in different ways in the Member States. In the Czech Republic, the provisions of the 5th Anti-Money Laundering Directive have been enshrined in the Czech Act No. 37/2021 Coll., on the registration of beneficial owners. Germany has approved new regulations in the GwG (Money Laundering Act), which specifically relates to the entry in the register of beneficial owners (in Germany the "Transparenzregister") in Sections 18 to 26 a of the GwG. The legal basis for the registration of beneficial owners in Austria (in Austria the 'Register der wirtschaftlichen Eigentümer') is WiEReG (Law on registration of beneficial owners).
Penalty for failure to enter data in the register of beneficial owners
One type of sanction is the imposition of fines. Under Section 55(2) of the Act on the registration of beneficial owners, a fine of up to CZK 500,000 may be imposed for failure to register the beneficial owner, failure to register new data and breach of the obligation to cooperate with the registered person. In Germany, these administrative offences are punishable by fines of up to EUR 150,000 if committed intentionally and otherwise by fines of up to EUR 100,000. In the event of a serious, repeated or systematic infringement, the administrative offence may be punishable under Section 56(3) GwG by a fine of up to EUR 1,000,000 or a fine of up to twice the economic benefit derived from the infringement. According to Section 15(1) WiEReG, the above-mentioned acts are punishable as financial offences in Austria and are punishable by a fine of up to EUR 200,000 in the case of intentional commission and a fine of up to EUR 100,000 in the case of gross negligence.
In Austria, other financial infringements and financial offences listed in Section 15(2) to (6) of the WiEReG are punishable by fines of up to EUR 75,000. These include, inter alia, the intentional transfer to third parties of data records or extracts containing data records that are marked with an information block or access restriction.
Administrative fine for failure to register beneficial owners in the Czech Republic, Germany and Austria
Only the Austrian WiEReG provides for administrative fines. An administrative fine (Zwangsstrafe) within the meaning of Section 111 of the BAO (Bundesabgabenordnung) is to be understood as a fine imposed by the tax authorities to enforce compliance with the relevant performance orders. The request and threat of an administrative fine must be made in writing in accordance with Section 111(2) BAO. If the beneficial owner is not informed, the Austrian tax authorities may impose a grace period of six weeks in accordance with Section 16 WiEReG. If this grace period is not complied with, the Austrian tax authority may impose an administrative fine in accordance with Section 111 BAO.
Notice of failure to register in Germany
In addition to fines, in Germany the offence is publicly reported. After the authority has informed the addressee of the measure or decision on fines, the final measure and the uncontested decision on fines imposed for the infringement of the GwG are published on the authority's website (decisions on fines (Transparenzregister)). According to Section 57 of the GwG, the final measure and the non-appealable decision on fines imposed for its violation are published. The type and nature of the violation and the natural and legal persons or associations of persons responsible for such violation are published.
Prohibition of profit sharing and liability of statutory bodies of the Czech Republic
The prohibition on the distribution of profit shares is not found in German or Austrian law, only in Czech law. This prohibition is set out in Section 53 of the Beneficial Owners Registration Act, which provides that if the beneficial owner of a business corporation is not registered in the beneficial owners register, neither a share of the profits nor a share in the benefit of such legal entity or legal contract may be transferred to him.
However, the Beneficial Owners Registration Act does not regulate the case where the shareholder is a foreign legal entity which is not obliged to state its beneficial owner under the law under which it was established.
Prohibition on the exercise of voting rights at shareholder meetings in the Czech Republic
Compared to Germany and Austria, only Czech law deprives voting rights at general meetings. In the case of a company with a single shareholder, or if the shareholder concerned has a majority of the voting rights for his shareholding necessary for decision-making, this sanction may render the company incapable of acting. As a result, the corporation can no longer decide on the appointment of the managing director or the distribution of profits.
Authorities responsible for administrative offences in the Czech Republic, Germany and Austria
According to Section 57 of the Czech Beneficial Owners Registration Act, penalties may be imposed by the municipal authority of the municipality where the suspect resides. In Germany, administrative offences are prosecuted by the Federal Office of Administration as the competent authority pursuant to Section 56(5) of the German GwG. In Austria, on the other hand, enforcement penalties, as well as their collection, recovery and transfer, are imposed by the Austrian Tax Office as the competent authority, in accordance with Section 14(6) of the Austrian WiEReG. Section 15(8) of the WiEReG in conjunction with Section 58(1) b of the FinStrG (Financial Crimes Act) requires the Austrian tax authority to report financial offences to the anti-fraud office.
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JUDr. Mojmír Ježek, Ph.D.
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